Published: Fri, May 19, 2017
Money | By Armando Alvarado

Gold Prices Rocket Higher As Dollar Tumbles

Gold Prices Rocket Higher As Dollar Tumbles

USA gold futures were up 0.5 percent at $1,242.90 an ounce.

Spot gold gained 0.3% at $1,233 per ounce at 0403 GMT.

There were media reports of a leaked memo written by former FBI Director Comey which suggested that Trump had asked for the investigation into former National Security Adviser Flynn to be stopped.

All of these are positive for the price of gold for two main reasons.

In the wider markets, the dollar stood near six-month lows against a basket of major currencies as the U.S. political crisis appeared to deepen, and likely to delay any efforts by Trump to carry out his economic stimulus plans.

This inverse relationship between the US dollar and gold has held throughout history and was one of the major reasons for the most recent gold rally from 2000 to 2010.

That was only the latest worry in a tumultuous week at the White House, which included allegations that the president tried to interfere with a federal investigation and shared classified information with Russia's foreign minister.

"Although there is increasing evidence of a bottom being formed in both gold and silver, we would like to see a bit more "staying power" before choosing to engage more aggressively on the long side", INTL FCStone analyst Edward Meir said.

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"A lack of progress on these issues should theoretically contribute to the Fed holding a more dovish course for longer, hurting the dollar and possibly equities in the longer term, but likely proving beneficial for gold", he said.

That political disorder reached a new head as several events coincided to increase uncertainty among investors and, therefore, sent them toward gold as a safe-haven asset. An unexpected fall in USA homebuilding meanwhile added to a run of weak economic data, raising new doubts about how many times the Federal Reserve will raise interest rates this year.

The dollar was subjected to renewed selling pressure with the trade-weighted index declining to fresh six-month lows.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.5 percent.

If gold can hold above that level it could rise to its long-term downtrend line at $1,287 an ounce, said technical analysts at Commerzbank.

On the Shanghai Futures Exchange, gold for December delivery added 0.4 percent to 281.05 yuan a gram, while silver rose 0.2 percent to 4,120 yuan a kilogram.

Spot gold was up 0.7 per cent at $1,245.46 an ounce at 1132GMT, after earlier touching $1,248.70 (Dh4,586.48), its highest since May 3.

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